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Univ. of Toledo College of Law

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Saturday, June 26, 2010

FINRA Arbitration Panel Tells Goldman to Pay $20.6 Million to Bayou Group Creditors

A FINRA arbitration panel ordered Goldman Sachs Group to pay $20.6 million (the largest arbitration award against a securities firm) to unsecured creditors of Bayou Group LLC.  The claimants alleged  Goldman, who acted as clearing broker for Bayou, ignored signs of fraud.  The fund's CEO, Samual Israel III, is in prison for fraud.  It is extremely rare to impose liability on a clearing broker for the fraud committed by a broker or an issuer.  As is customary, the arbitration panel did not give reasons.  WSJ, Goldman Told to Pay Bayou Fund Creditors.

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This laudable award is the largest arbitration award ever rendered against Goldman Sachs, but it is NOT the largest arbitration award against a securities firm. That distinction remains a $43 million award in Blumenfeld vs. Refco, on behalf of 13 investors, part of a larger number caught-up in a $100 million Ponzi scheme perpetrated on the floor of the Chicago Board of Trade (CBOT).

The very capable attorneys representing the Claimants in this Bayou v. Goldman Sachs case were also involved in the Blumenfeld v. Refco case. My firm provided expert witness testimony on behalf of the Claimants in both cases.

Robert E. Conner
Thornapple Associates, Inc.
Summit, New Jersey 07901

Posted by: Robert E. Conner | Jun 26, 2010 5:56:39 PM

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